Money News

Portugal's finance minister Centeno to step down

LISBON (Reuters) - Portugal’s Finance Minister Mario Centeno, credited with reversing long-standing austerity policies while also achieving the country’s first budget surplus in 45 years, will resign on June 15, it was announced on Tuesday.

FILE PHOTO: Portugal's Finance Minister and Eurogroup President Mario Centeno speaks during an interview with Reuters in Lisbon, Portugal February 28, 2020. REUTERS/Pedro Nunes/File Photo

Centeno had asked to stand down, President Marcelo Rebelo de Sousa said in a statement, and will be replaced as finance minister by Joao Leao, currently serving as budget secretary of state.

Centeno will also step down as chairman of the Eurogroup of euro zone finance ministers.

“My tenure as Eurogroup President will end on 13 July 2020. On Thursday, I will inform my Eurogroup colleagues of my decision not to seek a second mandate,” Centeno said on Twitter.

Hailed as the “Ronaldo of finances”, Centeno is credited with bringing Portugal’s public debt down by 14 percentage points to 117.7% in four years and reversing the country’s deep deficit to a 0.2% budget surplus in the last quarter of 2019.

But restoring fiscal credibility came at the expense of public investment, which critics say left the country’s social and economic infrastructure in a fragile state despite financial indicators improving.

“It is the end of a long cycle for the history of Portuguese democracy, and the numbers were part of this path. They have always been right, and will continue to be,” Centeno told a conference alongside Prime Minister Antonio Costa.

Portugal is gearing up for an expected 6.9% contraction in its export-oriented, tourism-dependent economy this year due to the impact of the coronavirus pandemic.

Leao was a key figure in developing the macroeconomic strategy of fiscal prudence which characterised Centeno’s time in office, but is closer to prime minister Costa politically, economist Filipe Garcia said.

“This can reinforce the political cohesion of the government, which is crucial at a time when the economy is going to enter a strong recession and high deficit,” Garcia said.

Leao was a member of the Economic and Social Council under the previous centre-right administration, working in the Ministry of the Economy and serving as a delegate to the OECD.

There has been speculation for months about whether Centeno was preparing to step down, but he guaranteed on March 23 he was “totally focused” on tackling the coronavirus crisis and his role as Eurogroup chief.

Reporting by Victoria Waldersee, Catarina Demony; Additional reporting by Sergio Goncalves; Editing by Catherine Evans and Ed Osmond